Survey: Suppliers' preference for Japanese automakers rises

U.S. automakers lag on trust, cooperation

By Robert Sherefkin
Julie Cantwell Armstrong

• May 12, 2003

Auto suppliers long have preferred to work with Japanese automakers rather than with the Big Three. Now, those feelings are even stronger.

In 17 measures ranging from trust to perceived opportunity to make acceptable profits, Japanese automakers consistently outperform their U.S. counterparts, according to an annual survey of supplier attitudes toward the six biggest U.S. automakers.

What's more, the 2003 survey shows Toyota, Honda and Nissan climbing even higher in suppliers' eyes. Among the bottom three, Ford Motor Co. and General Motors Corp. slipped, while DaimlerChrysler AG gained slightly. Generally, the Japanese are known for taking a more cooperative approach with their suppliers than the Big Three.

The results, to be released today, are certain to add fuel to one of the most contentious questions facing the industry: How much do an automaker's relations with its suppliers affect the automaker's overall performance?

The issue has become more important as the Big Three continue to lose U.S. market share to their Japanese competitors.

Of the 17 issues measured, none is more important to suppliers than trust, said survey author John Henke, an Oakland University professor of marketing and president of Planning Perspectives Inc., a management-consulting firm in Birmingham.

In the area of trust, suppliers gave Toyota a score of 3.59 out of a maximum of 4.0, up from 3.4 a year earlier. At the other end of the spectrum, GM rated 2.12, unchanged.

"We have top (Big Three) management saying to us that supplier relations are extremely important," Henke said. "There's no question in my mind that they're sincere about it.

"But when you get down to the buyer level, they're paid on the basis of getting the piece-price down. What top management would like to see in its supplier relationships is not being reinforced from a behavioral standpoint at the lower levels."

Japanese automakers in North America enjoy a leaner cost structure and lower warranty costs than the Big Three, as well as modern plants in low-cost areas. Henke said the Japanese are every bit as demanding as the Big Three on costs, but they employ cooperative efforts to obtain price cuts and reward suppliers with long-term relationships.

Big Three representatives defend their strategies. "GM and its suppliers are continuously driving to forge more collaborative relationships by collectively focusing on performance and common goals," GM spokeswoman Renee Rashid-Merem said.

DaimlerChrysler spokesman David Barnas said his company's relations with suppliers are based on performance.

"Our goal is to develop an all-star team every time we select suppliers," he said. "All of our suppliers are measured on quality, cost, technology and supply."

The Big Three problem is easy to understand but difficult to change, said industry analyst David Leiker of Robert W. Baird & Co. in Milwaukee.

GM, Ford and DaimlerChrysler are stuck with higher labor and warranty costs, older and less-efficient plants and post-retirement costs that the transplants do not have. At the same time, the Big Three must spend more heavily on incentives to sell their vehicles than the transplants because of perceived differences in quality and resale values.

As the Big Three try to fix their business model, they turn to their suppliers, the easiest targets, to generate cost savings.

The eight-page questionnaire brought responses from midlevel to high-level sales executives at 261 tier-one suppliers. They included 250 suppliers to the Big Three and 150 to Japanese automakers.

From Automotive News